How to open & set up an estate account?

An executor can use money in the estate bank account to pay a deceased person’s debts and the costs of probate

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Elissa SuhSenior Editor & Disability Insurance ExpertElissa Suh is a disability insurance expert and a former senior editor at Policygenius, where she also covered wills, trusts, and advance planning. Her work has appeared in MarketWatch, CNBC, PBS, Inverse, The Philadelphia Inquirer, and more.

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An estate account is a bank account that an estate’s executor or personal representative opens — in the name of the deceased person’s estate — to temporarily hold the deceased person’s assets. The executor can then settle the deceased person’s unfinished affairs using the money in the account.

After someone dies, all of their belongings become part of their estate. Before the assets can be legally distributed to beneficiaries, the executor is required to do a few things. In addition to filing and executing the decedent’s will, they must make sure the debts to creditors and taxes of the estate are fully paid. The estate account can be used to pay for the estate’s financial obligations as well as probate-related expenses encountered by the executor.

If you are the executor or administrator of an estate, you can open an estate account after getting necessary documents, like the decedent’s death certificate and a taxpayer identification number for the estate. You will also need proof that you are legally acting as executor or administrator, which you receive by initiating probate and filing a petition with the court for formal recognition.

Key takeaways

  • An estate account is a bank account held in the name of the deceased person’s estate.

  • The executor can use estate funds to pay debts and taxes on behalf of the estate.

  • Using an estate account can help keep the deceased’s financial matters separate from an executor’s personal financial matters.

  • You can open an estate bank account after initiating probate and petitioning the court for formal recognition as executor or administrator.

Why do I need an estate account?

The executor (personal representative) or administrator has a legal responsibility to take care of the decedent’s estate, which is just the collection of everything that they owned, and to pay any of the decedent’s financial obligations, like taxes, debts, and court fees.

A strong estate plan starts with life insurance

The executor is not responsible for paying these expenses on their own, but is entitled to use the deceased person’s assets to cover the payment instead, which is why it’s common practice for the executor to open an estate account.

Estate bank accounts are necessary for the executor’s organization. Using the estate bank account to pay for expenses keeps a clear line from the estate’s finances versus the executor’s personal finances. It sets a clear record of how estate funds were used, which can help prevent any squabbles that may arise if beneficiaries or loved ones accuse the executor of acting in bad faith and stealing money from the estate.

→ Have you been named executor of an estate? Read more about an executor’s duties

What to use the estate funds for

The estate account can be used to pay the decedent’s unpaid credit cards, auto payments, mortgage payments, and other debts. It is also used to pay any applicable estate tax or income tax. (In fact, it is the executor’s job to file a final tax return, Form 1041, for the decedent.) The executor can also use the estate account to pay for costs related to probate, like court filing fees, which they may encounter during estate administration.

If the decedent continues to earn any money, the executor can also direct any income and outstanding deposits into the estate account. After someone dies, their accounts are frozen, so you typically won’t be able to deposit checks made out to the deceased person into their bank account, nor will you be able to deposit their checks into your own personal account.

What is the difference between a trust account and an estate account?

Some people choose to create a trust as part of their estate plan. Having a trust is one way to pass assets onto beneficiaries and loved ones.

A trust account is a financial account that has a beneficiary and is managed by a trustee (and eventually a successor trustee) who oversees its activity. The trust account is not an estate asset, so the executor does not have any control over it. That also means that trust assets typically avoid probate, so your beneficiaries may be able to receive an inheritance faster than they would with a will.

How do you open an estate bank account?

If you’re planning to act as executor or administrator of an estate, you can open an estate account in a few steps:

  1. Get the death certificate

  2. File for probate

  3. Apply for a taxpayer ID number

  4. Open the account

1. Get the death certificate

Before you can do anything, you must get proof that the decedent has in fact died. You will need to get the death certificate and copies of it, which you’ll use throughout the probate process.

→ Learn more about what to do when someone dies

2. File for probate and get recognition from the court

In order for you to open an estate bank account, the court must acknowledge that you are legally acting on behalf of the estate as executor or administrator. Getting an official appointment of executor (letters testamentary) is the first part of probate, which is the legal process of distributing the decedent’s assets and proving the will if there was one.

If you are named as executor in the decedent’s will, you can file a petition with the probate court to get formal recognition. The court will issue a legal document called letters testamentary or letters of administration, which proves that you are representative of the estate and can act on its behalf.

When someone dies without a will, there may be some limitations as to who can apply as administrator. For example, the surviving spouse may have a first claim. They'll go through a similar process to receive letters of administration.

→ Learn how to become executor of the estate without a will

3. Get a tax ID number

The estate is its own entity and as such is responsible for its own taxes. That means the estate needs its own taxpayer identification number, which is called an employer identification number (EIN). EINs are assigned to estates, as well as employers, trusts, and other entities for tax-filing purposes.

You can get one for the estate by filling out the IRS Form SS-4, Application for Employer Identification Number, which is available on the IRS website. The IRS also has an online EIN application that allows you to get your number immediately.

4. Open an estate account

Now that you have all the necessary documents, you can bring them to a financial institution like a bank or credit union to open the estate account. Your bank may offer a special account explicitly intended for estates.

Most estates only need to open a basic checking account so the executor can arrange payments. However, for more complex estates, you might need to open multiple accounts or at least a brokerage account in the name of the decedent’s estate to handle investments. For example, if the decedent’s estate includes a retirement account or any investment accounts without named beneficiaries, the executor could consolidate them all under one estate account. Some financial institutions may even offer an estate account that you can use as both a checking account and an investment account.

Make sure to have the details (or statements) of any of the decedent’s funds and financial accounts you wish to transfer into the estate account.

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